A 2027 capital budget can be approved down to the dollar and still miss the month the cash leaves the bank. Annual totals are excellent at hiding vendor payment terms. Vendors, less so.
Build the 2027 CapEx cash flow forecast project by project. Separate the date leadership authorizes an investment, the dates money is expected to be paid, and the date the asset is ready for use. Then reconcile those schedules to the annual capital plan. The numbers should connect. They should not pretend to describe the same event.
The annual CapEx number is not a cash calendar
Each approved project needs a named owner, amount authorized, payment milestones, expected invoice and settlement dates, delivery date, and expected in-service date. Add an explanation of what operational capacity the asset is supposed to provide. A purchase order tells finance what was committed; it rarely tells finance enough about liquidity.
The payment forecast should follow actual contract terms: deposits, progress payments, delivery balances and supplier credit. Use expected cash settlement dates rather than automatically treating the invoice month as the payment month. For debt-financed purchases or leases, model the contractual financing and cash effects separately.
Depreciation follows a different clock. The timing and method depend on the applicable accounting policy and when the asset is ready for its intended use, not when management approves the budget. The SEC’s financial statement guide illustrates the distinction: buying equipment uses investing cash; depreciation is a noncash expense reflected in the income statement and adjusted in operating cash flow.
A 2027 equipment purchase, three different answers
Consider a hypothetical $1.2 million equipment purchase. The supplier requires a 20% deposit in February 2027 and the remaining 80% on delivery in September. The equipment is expected to be ready for use on October 1. For illustration, assume straight-line depreciation over five years, no residual value, and monthly depreciation starting in October.
- February cash: $240,000 deposit.
- September cash: $960,000 final payment.
- 2027 cash paid: $1.2 million, heavily concentrated in September.
- 2027 depreciation: $60,000, or three months at $20,000.
Those are not competing estimates. They answer different questions. An annual budget showing $1.2 million of approved investment tells the CFO almost nothing about September’s cash headroom; a depreciation forecast showing $60,000 tells even less. The controller should confirm the actual treatment of deposits, capitalization and useful lives.
Now move the delivery date
Suppose the supplier moves delivery and the final contractual payment to January 2028. Assume the equipment cannot be made ready for use until then. Under those revised assumptions, only the $240,000 deposit leaves cash in 2027, and this example records no 2027 depreciation for the new equipment. But the remaining $960,000 commitment has not vanished. Nor has the capacity the operating plan expected from October.
A cash forecast that improves because a supplier is late deserves a second question: What happens to revenue, output or customer delivery while we wait? A delay might preserve short-term liquidity and undermine the project economics at the same time. Neither effect belongs in a footnote.
Give leadership a decision before approval
For each material 2027 project, show the cash peak by month, the committed but unpaid balance, the first month the asset can contribute, and the downside case if delivery slips. Reconcile opening commitments plus new approvals, less cancellations and payments, to closing unpaid commitments. This is a management control schedule, not a substitute for the accounting fixed-asset rollforward.
Where cash headroom is tight, leadership has choices: move an optional project, renegotiate milestone terms, identify financing, or adjust the operating plan. They need to know which commitments can actually be changed and what the business would give up. That is a stronger capital conversation than asking every department to cut the same percentage.
The broader discipline is covered in FP&A’s role in CapEx planning; the cash timing belongs in the forecast itself. The SEC’s published accounting correspondence also illustrates why an asset’s readiness matters for depreciation timing.
If the current model cannot connect investment approvals to monthly cash and operational outcomes, The Schlott Company’s financial modeling services are a practical place to address that gap.